Portfolio

Saturday, May 27, 2017

"The willingness of America's veterans to sacrifice for our country has earned them our lasting gratitude." - Jeff Miller

Let's not forget the real reasons why Memorial Day marks the unofficial start of summer in the USA. It takes a lot of courage, will, and fearlessness to fight for what you truly believe. That common belief runs through all of us. The belief that we are free individuals to pursue our dreams, and a life full of happiness. It doesn't matter what country you hail from. Ultimately that's what we all want in life. So as you sit back unwind on a long scenic road trip, and BBQ in the back yard with family and friends give a thought of gratitude to those whom gave the ultimate sacrifice so we could pursue our dreams.

This week was full of news. We received the Fed Minutes which shined some light on the Fed's interest rate intentions, and balance sheet issues.

Friday, May 26, 2017

Earlier this week I pondered if Sugar Is A Bad Investment? I highlighted portfolio member Hershey's(HSY) along with fellow snack, and confectioners. It was noteworthy to see the overall out-performance of the group compared to the S&P 500 over 5 years.

Today we are going to take a quick look at what's most likely the sugar industries dreaded 800 pound gorilla. Beverage Manufacturers. They have been under increased public scrutiny due to high sugar content drinks that offer no additional nutritional value. There also seems to be a larger incorrect belief by the public that sugary drinks are more harmful than sugary snacks.

Thursday, May 25, 2017

On May 23rd after the close we received FY 2017 & Q4 results from Universal Corp(UVV). The company reported Q4 EPS loss of $1.64 on revenues of $650 million. The loss was a result of a mandatory conversion of UVV's 6.75% convertible perpetual preferred shares into approximately 2.5 million common shares, which resulted in a one time cost at $74.4 million reducing EPS by $2.99(basic) & $2.90(diluted). For the year the company reported EPS of $0.88 on revenues slightly down at $2.07 billion. If you add back the share conversion charge for the quarter UVV earned on a diluted basis $1.35, and for the year $3.88. Both numbers are down from $1.95 & $3.92 respectively in 2016. Shares took a 5 point hit on the news, and have been extremely choppy in 2017 after hitting a high of $83.35 in February. Here is part of managements statement:

Tuesday, May 23, 2017

I've been thinking about the danger's of sugar a lot lately as I try cutting down my own consumption to shed a few extra pounds for summer. It's no secret that consuming sugary drinks, and especially sugar laden foods are bad for your overall health.

I decided to look at the performance of Tootsie Roll(TR), Mondelez(MDLZ), and portfolio member Hershey's(HSY) versus the S&P 500.

Saturday, May 20, 2017

Was that the correction we have all been waiting for? Earlier this week the markets caught a lot of people off guard when all the major indexes dropped 1.50%, and the Russell took a whopping when at one point it was down around 2.50%. The indexes rallied back to erase most of the losses for the week. Time will tell if this turns out to be the start of a pullback, or just a blip on the radar screen. I'd welcome a good 5-10% downdraft in equities. It'd be healthy for the market to wipe out some weaker hands, and create a nice base for further gains.

YTD the majors are all still showing gains, led heavily by technology stocks, and some lagging by small caps.

S&P 500 - 6.38%Dow Jones - 5.27%Nasdaq - 13.01%Russell 2000 - 0.75%

The drop was so surprising because the Volatility Index(VIX) was testing decade long lows below 10 when all of the sudden it surged 50%+. That might sound like a huge number but the VIX ultimately only hit a high of 16.30, and it's not abnormal for the index to trade around that number historically. I don't like to think of the VIX as the best overall indicator for tops either. Personally I think it's a bit better at marking bottoms.

We received economic reports his week per usual, and the standout was Industrial Production which rose 1.0%. That's a good number since more manufacturing works its way throughout the economy very well. Remember about 3 weeks ago I pointed out the decades long time decline in Industrial Capacity Utilization.

It was a quiet week on the news front. No holdings had earnings this week as earnings season wraps up. The portfolio was however a bit choppy due to the overall market.

Global Payments(GPN), PayPal(PYPL), and Visa(V) all hit a 52-week high to start the week. Global Payments now trades with a $90 handle, and Paypal just edged above the psychologically important $50 level for the first time. Needless to say I'm expecting big things from this group. The portfolio isn't shy about focusing on certain sectors such as financial payments, and tobacco. It means the portfolio can lag the market at times due to it's concentration, but when these sectors are out-performing like they should it translates to much better gains.

Wednesday, May 17, 2017

One thing I like to do is compare the performance of certain groups of
stocks, asset classes, or strategies. Today I'm going to take a look at what appears to be a similar investing strategy, and how it can affect your results with just a few charts.

Many investors are fans of buying the best available stocks. For good reason as they usually carry the following traits:

Saturday, May 13, 2017

Despite what seems to be a constant barrage of worries about European elections, Chinese capital flows, trade & tax reform going nowhere, and dysfunction in DC as normal the markets keep chugging along to new highs just about everyday.

Wednesday, May 10, 2017

There's nothing like waking up on a Wednesday morning to find out you received a 20% pay raise for doing little more than holding some stock in a great company. Today Wabtec(WAB) announced a 20% hike in their dividend to a quarterly rate of $0.12 from $0.10. That comes out to a current dividend yield of around 0.58%. For their fiscal year Wabtec is projected to payout $0.46/share in dividends. That's not a huge yield compared to some other holdings like Altria(MO) which sports a 3.6% yield.

Still WAB has raised it's dividend for 7 years in a row now, and sports a 10 year dividend growth rate of 36%.

Tuesday, May 9, 2017

Life got a bit in the way last week but here is a quick earnings recap for Vector Group(VGR), and Cognizant Technology Solutions(CTSH).

Vector Group(VGR) reported Q1 results with EPS of $-0.03 on revenues of $415 million. The loss is mainly due to extinguishing older 7.75% senior secured notes due 2021 with new notes of $850 million principal at 6.125% due 2025. The company reported strong growth in their tobacco brands as consumers look for discounted options with a 6.2% YoY increase in retail shipments. The stock took a dive after earnings, but that's short term noise. The company is still well positioned within the real estate markets it transacts, and maybe it's looking like the other major tobacco companies have come close to their max price points in a lot of markets judging by the VGR's surge in discount brand sales. That's not exactly a great thought considering the portfolio is heavy in tobacco, but I think this is a short-term industry issue.

Thursday, May 4, 2017

We had a trifecta of earnings reports this AM. I say trifecta because all three stocks are up, and as I write this each one is up over 4%.

AB Inbev(BUD) reported Q1 results with EPS of $0.71 on revenues of 12.9 billion. Despite flat overall volumes and a small 3.7% revenue increase, revenue growth in their 3 big brands(Stella, Budweiser, & Corona) grew by 12.1% as consumers continue to stick with big brands they love. The stock is so far up 5.5%. Here is part of managements comments.

Tuesday, May 2, 2017

An absolute flurry of earnings reports this morning already as we received results from 5 companies in our portfolio including Altria(MO), Cummins(CMI), Emerson Electric(EMR), HCP(HCP), and MasterCard(MA).

Altria(MO) reported Q1 results with EPS of $0.72 on net revenues of $6 billion. The company reported a 2.6% decline in smokeable products volume, and a 5% decline in smokeless products. The company re-iterated full year guidance for EPS growth of 7.5%-9.5%. The stock initially dipped this morning below $70, but has fought all the way back up to $71+. Here is what management had to say.

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